Equity (Stock Options)
Ownership stake in a company granted to employees, typically in the form of stock options or restricted stock units (RSUs), as part of their compensation.
Equity compensation gives employees a financial stake in the company they work for. The most common forms are stock options (the right to buy shares at a fixed price at a future date) and Restricted Stock Units (RSUs, shares granted outright after a vesting period). Equity is especially common at startups and high-growth companies as a way to attract talent without matching the cash compensation of larger organisations.
The value of equity depends heavily on the company's trajectory. At an early-stage startup, equity may be worth little or nothing; at a successful company approaching IPO or acquisition, it can represent significant wealth. Candidates should understand the type of equity, the vesting schedule, the strike price (for options), and the most recent valuation before assessing the value of an equity grant.
For remote and internationally distributed teams, equity plans carry additional complexity: tax treatment of options and RSUs varies dramatically by country. Employees should seek independent financial and tax advice, and companies should offer clear documentation of how their equity plan works in each jurisdiction.